Supply Chain Finance

In this article, we discuss the opportunities of digtal supply chains from a supply chain nance perspective. In doing so, we rst highlight the importance of supply chain finance at times of global supply shortages. Then, we explain why digital platforms are necessary in this context and what challenges their introduction entails. Finally, we provide an outlook towards distributed ledger technology and blockchain.

A supply chain is a worldwide network of suppliers, manufacturers, warehouses, distribution centres and retailers through which raw materials are procured, transformed and delivered to customers. In recent years, a new systems approach to supply chain management has emerged at both tactical and operational levels. It views a supply chain as an interaction of intelligent (software) agents that are responsible for one or more activities and interact with other related agents in planning and executing tasks. In this article two application examples of so-called multi-agent systems for supply chain management are presented.

Today’s supply chains are characterized by strong linkages between buying and supplying firms in product development as well as production. This results in mutual dependencies and strongly interrelated product, capital and information flows. Improvement potential still exists in the optimization of supply chain finance across the supply chain partners as processes, taxes and cost of capital improvements across the supply chain generate significant savings and lead to competitive advantages. Cooperative supply chain finance approaches - e.g. debt financing support for suppliers - can turn indispensable suppliers to strategic supply chain partners. The identification of strategic suppliers and the selection of an appropriate supply chain finance strategy can be evaluated using the presented supply chain finance matrix. Furthermore, this article provides insights on how supply chain finance can be used to improve holistically the supply chain activities.

Excessive or inefficient inventory management leads to tied-up capital which reduces a firm’s liquid assets. Days Inventory Outstanding (DIO) - measuring the duration of capital being tied-up in inventory - remained almost unchanged during the past decade. Results of our study indicate that firms where supply chain management is represented in the top management achieve on average a DIO reduction of 4.5 days compared to other firms in the same industry. This amounts to a cash release of 92.7 million US-Dollars which equals 8.7 % of the firms’ inventory and 1 % of the firms’ turnover. Furthermore, it helps firms to outperform their peers in average by a five percentage points higher Return on Capital Employed (ROCE).

Logistics service providers intend to provide their costumers with efficient logistics processes and low-cost services. Besides the classical aspects of the controlling of the material and information flow in the supply chain, logistics service providers have begun in the last years to offer additional value added services to their costumers. The value-orientation of industrial and trading companies has put the demand on logistics service providers to provide logistics solutions for a financial optimisation of the supply chain. This contribution will show a solution in form of the “Supply Chain Finance Cooperation”.